Inputs Market Update: Fertilizer Extends Declines

January 11, 2016 04:07 PM

 

Gains tallied $0.01 to Declines' $38.43 in the regional averages.

NCIUSDA's reports this week will have an impact on the gap between fertilizer and corn prices, but so far this week, traders on the short side have given no indication of covering positions ahead of the reports. The market is poised for a shift since the short side is so overloaded, but Tuesday's reports are expected to come in with a yawn, and will very likely encourage more of the same price action that we have seen in recent weeks, and corn and soybeans will likely chop sideways with a lower bias. We have said it before, but as fertilizer prices have fallen sharply, so have corn futures and it will be up to corn to right the disparity between the two.

Having said that, fertilizer prices are now low enough that, as long as growers take advantage of upticks in cash prices to offset inputs purchases, corn should give opportunities in the coming months to even out the production budget.

NH3This week fertilizer continued to soften with all of the products we survey under pressure. As with last week, anhydrous ammonia led declines in this week's survey, falling another $10.96 regionally. That puts us below $600 per short ton for spring NH3. We advise holding out for a bid below $600 before pulling the trigger, but once your local bid sinks below that level, do not delay and book at least a portion of your
NH3 for spring/summer. We speculated last week about how far UAN and urea would follow NH3 to the downside since prices have already softened chapel, even making a case that NH3 could firm to rejoin the rest of the slightly higher priced nitrogen segment. We will be watching the margins between our nitrogen products for an indication that either NH3 has overdone it to the downside or if UAN and urea will dip to reflect lower anhydrous pricing.

UANPhosphates continued lower with DAP and MAP each lower about five and a half bucks. We normally see phosphate products trading gains and declines from week to week and the fact that both DAP and MAP fell in kind for the second straight week implies phosphate will remain under pressure near-term. Meanwhile, potash continues to win friends on the farm and with global supplies bulging, prices may continue to trail until demand for spring K adds price support.

Diesel is down again this week, falling another 3 cents regionally. February heating oil futures tested support at $1.00 today and bounced a penny back to the upside. If forecasts for deep snows in the northeastern part of the U.S. are correct, $1.00 may be short-term support for Feb heating oil. That would suggest a price floor for farm diesel is not far off, but WTI crude oil keeps exploring the downside and my keep the pressure on farm diesel.

DieselPropane popped one cent on upside action in Nebraska although every other state in our price survey registered unchanged this week. We expect to see localized price strength where temperatures have turned frigid, and if temperatures return to a more seasonal pattern, propane will likely look to take advantage of increased demand for home heat. We do not, however, expect prices to firm above a regional average of $1.10 per gallon anytime soon.

Corn Futures -- December 2016 corn futures closed Friday, January 8 at $3.57 putting expected new-crop revenue (eNCR) at $558.09 per acre -- lower $43.70/acre on the week. With anhydrous priced at $591.80 this week, the eNCR/NH3 spread widened 32.74 points and now stands at 33.71. This means one ton of anhydrous ammonia is priced at a $33.71 premium to expected new-crop revenue per acre.

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Nutrient/Fuel
12/28/15
1/4/16
Week-over Change
Current Week
Nutrient/Fuel
Anhydrous
$618.41
$602.76
-$15.65
$591.80
Anhydrous
DAP
$513.97
$507.46
-$6.51
$502.04
DAP
MAP
$534.57
$529.19
-$5.38
$523.85
MAP
Potash
$397.21
$391.37
-$5.84
$382.76
Potash
UAN28
$285.98
$280.72
-$5.26
$279.00
UAN28
UAN32
$313.52
$313.31
-21 cents
$312.92
UAN32
Urea
$391.89
$387.94
-$3.94
$381.99
Urea
Farm Diesel
$1.75
$1.70
-5 cents
$1.67
Farm Diesel
LP
$1.04
$1.01
-3 cents
$1.02
LP
Composite
629.15
620.93
-13.03
607.90
Composite